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Klöckner & Co - Roadshow Presentation April 29, 2007

This document provides an overview of Klöckner & Co, a leading multi-metal distributor. Some key points: - Klöckner & Co is a leading steel and metal distributor in Europe and North America with about 240 warehouses and 10,000 employees. - In 2006, Klöckner & Co had sales of €5.5 billion, EBITDA of €395 million, and net indebtedness of €365 million. - The company follows a strategy of profitable growth through value-added distribution and services, focusing on acquisitions, organic growth, and business optimization programs like their STAR program.

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Klöckner & Co - A Leading Multi Metal Distributor - April 2007 Gisbert Rühl CFO Dr. Thomas Ludwig CEO
2 Agenda 1. Overview, Market and Strategy Appendix 2. Financials and Outlook
3 Klöckner & Co at a glance Klöckner & Co highlights • Leading producer-independent steel and metal distributor in the European and North American markets combined • Distribution network with approx. 240 warehouses in Europe and North America • About 10,000 employees • Key financials FY 2006 - Sales: €5,532 million - EBITDA: €395 million - Net indebtedness €365 million DistributorProducer Customer Products: Services: Construction: • Structural Steelwork • Building and civil engineering Machinery/ Mechanical Engineering Others: • Automotive • Metal products/ goods, installation • Durable goods • etc. Overview
4 Distributor in the sweet spot Suppliers Sourcing Products and services Logistics/ Distribution Customers • Global Sourcing in competitive sizes • Strategic partnerships • Frame contracts • Leverage one supplier against the other • No speculative trading • One-stop-shop with wide product range of high-quality products • Value added processing services • Quality assurance • Efficient inventory management • Local presence • Tailor-made logistics including on- time delivery within 24 hours • More than 200,000 customers • No customer with more than 1% of sales • Average order size of €2,000 • Wide range of industries and markets • Service more important than price • Purchase volume p.a. of 6 million tones • Diversified set of worldwide ca. 70 suppliers • Examples: Klöckner & Co’s value chain Overview Global suppliers Local customers
5 Global reach with broad product and customer diversification Germany/ Austria 23% France/ Belgium 21% Switzerland 15% Spain 10% UK 9% Nether- lands 6% Eastern Europe 1% USA 10% Canada 5% Steel-flat Products 28% Steel-long Products 31%Tubes 9% Special Steel/ Quality Steel 10% Aluminum 8% Other Products 14% Construc- tion 40% Machinery/ Manufacturing 20% Auto- motive 5% Metal Products 20% Other 15% USA CAD USA CAN G 25 Locations F 76 Locations CH 31 Locations E 48 Locations UK 24 Locations IE 1 Location NL 7 Locations Eastern Europe 4 Locations CAN 5 Locations USA 17 Locations Total 238 Locations Locations (Dec. 31, 2006) Country headquarters Sales split by markets (2006) Sales split by product (2006) Sales split by industry (2006) IE Overview
6 Strong position in Europe; significantly improved position in NA after acquisition of Primary Europe (2005) North America (2005) Arcelor Mittal AM3S 12% (Sales Distribution €3.2m = 5%) ThyssenKrupp 8% Corus 6.5% Klöckner & Co 5.9% Other Mill-Tied Distributors ~15- 25% Other Independents ~45-55% Klöckner & Co 6% Corus 4% Source: EuroMetal, Company reports, Klöckner & Co Other 72.5% Ryerson 5.0% Reliance Steel 4.4% Samuel, Son & Co. 2.3% ThyssenKrupp Materials NA 2.0% Russel Metals 1.9% Worthington Steel 1.6% Metals USA 1.3% Carpenter Technology 1.1% PNA Group 1.1% McJunkin 1.2% O'Neal Steel 1.4% MacSteel Service Centers 1.5% Olympic Steel 0.8% AM Castle 0.7% Klöckner & Co 1 1.0% 1) Operates as Namasco in North America Source: Purchasing Magazine (May 2006) Market Structure: 67% through distribution, service centers Size in value: ~€65–80bn Companies: ~3,000 few mill-tied, most independent Structure: 50-60% through distribution, service centers Size in value: ~€68-92bn Companies: ~1,300 only independent distributors Only independent in top tier
7 Broad coverage of the US market and much stronger platform for further bolt-on acquisitions Geographical Scope Primary outlet Primary Sales office Oakland Houston Missouri Chicago Tampa Charlotte Arizona Arkansas Iowa Alabama Georgia South Carolina North Carolina Indiana Maryland Maine Connecticut Florida Louisiana Illinois Texas California Dubuque Louisville Indianapolis Atlanta B´ham Charleston Dallas Austin New Orleans Jacksonville Orlando Pompano Phoenix Santa Fee Springs Tulare West Memphis Savannah Portland Middletown New Castle Namasco Gen. line Namasco Processing • Sales: 2006: $467 million • Leading market position in plate distribution • Wide range of offered services • Broad geographic coverage with seven locations Key Facts Primary Steel
8 Investment highlights • The plate market is attractive and has a good perspective • Pricing has been relatively stable and less volatile than other segments (also supported by high supply side concentration) • Low dependency on individual market segments • Good growth perspective for main segments heavy equipment, oil & gas, transportation and railcar, shipbuilding, etc. • Primary is a well respected and well managed major player in plate distribution segment • Good quality based market reputation • Decent profitability and relatively good operational performance also supported by PE environment • Strong management team with good acquisition track record • A combined Primary and Namasco company would create a leading position in plate distribution • Estimated total market share of 10% in plate segment • Broad geographic coverage • Wide range of offered services • Complementary sales coverage combined with strong product overlap offers synergy potential • Namasco’s market coverage hugely enlarged • More than doubled purchasing power helps to counterweight the strong supplier consolidation (top 3 account for more than 90% of market) • Additional (typical) synergies in admin, finance, IT, etc. Growth in an attractive market segment Acquire respected and well managed business Synergies Leading position in plate segment Primary Steel
9 High added value, low customer concentration with broad industry split and complementary product mix Product Mix (2006, $ mio.) (1) 0 50 100 150 200 250 Strip Mill As Rolled FR Pipe Merch. Bar Beams / struc. Tube others Primary Namasco Customer concentration Customer 1 Shipbuilding 4,2% Customer 2 Power Generation 3,1% Customer 3 Oil & Gas 1,9% Customer 4 Transp. Equipment 2,1% Customer 5 Service Center 1,9% Customer 6 Transp. Equipment 1,8% Customer 7 Oil & Gas 1,4% Customer 8 Oil & Gas 1,4% Customer 9 Ind. Equipment 1,3% Customer 10 Service Center 1,0% Segments Served Service Centres 33,5% Metal builders 2,9% Construction 2,6% Heavy in. Equip. 29,3% Transp. Equipment 4,5% Ship building 4,8% Oil & Gas 16,2% Power Generation 6,2% Sales split by type of value added Cut to length 45% Stock sales 34% Shearing 1% Slitting 3% Thermal cutting 13% Outside Processing 4% Primary Steel
10 Steel industry trends Industry trends supporting Klöckner’s strategy • Globalization and consolidation resulted in large costs savings, higher and more flexible capacity utilization, much better supply discipline and higher pricing power, which will prevent the margin destroying behaviour from the past • Capacity and export containment in China under the drive of central government • Higher material costs especially of iron ore and decreasingly relevant fixed costs have flattened the global steel cost curve in favour of developed-market steel producers • Stable global demand growth leads to far quicker destocking and eroded global overcapacity • On-going consolidation favouring large scale distributors • Higher prices with much shorter downturns support more stable earnings and cash flows for distributors Strategy
11 Profitable growth Strategy Profitable growth through value- added distribution and services within multi metals to companies in Europe and North America Grow more than the market Continuous business optimization 1 Acquisitions driving market consolidation 2 Organic growth and expansion into new markets 3 STAR Program: - Purchasing - Distribution network - Inventory management
12 Acquisitions driving market consolidation1 Next steps Further acquisitions in core markets at attractive valuations: • Leverage existing structure with 10 to 12 smaller (local) bolt on acquisitions in 2007 • Medium and large scale acquisitions when appropriate • Include attractive industries, e.g. oil and gas Focus on targets in key markets at attractive valuations Strategy Benefits Significant synergy opportunities • Streamlining operations, processes and sales force • Integration of STAR Economies of scale • Stronger purchasing power Strategy Status Quo • Attractive valuations • Proven acquisition integration capability 04/2007: Teuling €14 million sales; 16 employees 01/2007: Tournier €35 million sales; 41 employees 10/2006: Action Steel €55 million sales; 110 employees 10/2006: Gauss €10 million sales; 40 employees 07/2006: Aesga €18 million sales; 40 employees 02/2006: Targe €25 million sales; 50 employees 10/2005: Alu Menziken Service €33 million sales; 70 employees 07/2005: Reynolds €108 million sales; 150 employees 04/2007: Primary Steel €360 million sales; 389 employees
13 Organic growth and expansion into new markets2 Status Quo • Strong growth in core markets above GDP partly as a result of the outstanding development of the construction and machinery industries and steel prices • Improved performance mainly in Germany and France due to organizational changes • Eastern European facilities established in Poland, Czech Republic, Romania and Baltic States • Extending activities of our Chinese representative office Next steps Expansion of strong market positions in core markets: • “STAR-Program” supporting organic growth • Selective extension of product range • Increase value added services through investments in new processing capacity • Extension of customer base • Opening of new branches in Eastern Europe (Romania, Poland, Czech Republic and Baltic States) Leveraging existing distribution network Strategy Benefits Sustainable profitable growth Strategy
14 Purchasing – Status Quo Improved performance as a result of restructured distribution network: • Close-down of warehouses in Northern Germany (3 0) • Reduction number of warehouses in the Lyon area in France (8 4) • Improvement warehouse structure in the Iowa- region in US (3 1) • Restructuring of service center business in Switzerland (3 1) 3 Next steps STAR: Status quo 2006 and next steps Distribution – Status Quo Next steps • Continuous improvement of distribution network throughout the Group with support of the optimization-tool “Prodacapo” (activity based costing) • Ongoing roll-out throughout the European countries • Finalize implementation of SAP throughout the European organization (France, Switzerland) and interface SAP with Prodacapo • Implement unified article code • Finalize central purchasing on country level, especially in Germany • Establish European purchasing (STAR Phase II) and increase sourcing from world-class suppliers with structural cost advantages • Frame contracts with main suppliers • Global sourcing for third party countries • Implementation of new organization in Germany (January 1, 2007) Strategy
15 3 STAR: Phase I finalized in 2008, further potential in Phase II Phase I (2005 - 2008) Overall targets: • Central purchasing on country level, especially in Germany • Improvement of distribution network • Improvement of inventory management 2006: ~ €20 million 2007: ~ €40 million 2008: ~ €20 million ~ €80 million Phase II (2008 onwards) Phase I upside potential Overall targets: • European Sourcing • Ongoing improvement of distribution network Strategy
16 Agenda 1. Overview, Market and Strategy Appendix 2. Financials and Outlook
17 Strong quarterly development in 2006 compared to 2005 48494654 70 108104 74 05 Q1 06 05 Q2 06 05 Q3 06 05 Q4 06 EBITDA¹ (€m) Net debt deleveraging2 (€m) Sales (€m) 670 482 435 365 Q1 06 Q2 06 Q3 06 Q4 06 1,2171,191 1,348 1,207 1.3981,3941,4181,323 05 Q1 06 05 Q2 06 05 Q3 06 05 Q4 06 Fast and constants deleveraging Sales increase driven by volume and price increases 1) Adjusted by one-off effects (asset disposals): Q1 2006: about 5M€ and Q3 2006: about 35M€ 2) Q1 2006 incl. shareholder loan Strong profitability growth in Q2 and Q3 also driven by stock profits Financials
18 Summary Income Statement Q4/FY 2006 --4.44--1.16Earnings per Share in € -36206-254Net income - - - 81 -29 16 273 -39 28 - - - 17 -11 4 43 16 5 Income before taxes Income taxes Minority interests +149.6% - 135 -54 337 -64 +77.4% - 31 -14 55 -12 EBIT Financial result +100.5% - 197 4.0 395 7.1 +42.9% - 49 4.0 70 4.9 EBITDA % margin +22.5% - 986 19.9 1,208 21.8 +11.4% - 264 21,7 294 21.0 Gross profit % margin +11.4%4,9645,532+14.8%1,2171,398Sales Ä% FY 2005* FY 2006Ä% Q4 2005 Q4 2006 (€m) * Pro-forma consolidated figures for FY 2005, without release of negative goodwill of €139 million and without transaction costs of €39 million, without restructuring expenses of €17 million (incurred Q4) and without activity disposal of €1,9 million (incurred Q4) Financials
19 Segment Performance FY 2006 3955,532Total -50-HQ/Consol. 79862North America 3664,670Europe EBITDASales(€m) • Both segments show excellent performance • Sales in Europe including €164 million from Reynolds (F), €65 million from Alu Menziken Metall Service (CH), €8 million from Aesga (E), €2 million from Gauss (CH), €20 million from Targe (F) and €8 million from Klöckner Romania • Sales in North America including €15 million from Action Steel Comments Financials
20 Balance Sheet FY 2006 957 719 1, 135 365 Net Working Capital Net financial debt 2,2562,552Total equity and liabilities 2,256 323 921 589 1,012 536 - 2,552 799 744 416 1,009 639 - Total assets Equity Total long-term liabilities - thereof financial liabilities Total short-term liabilities - thereof trade payables Other liabilities 595 694 800 80 87 579 841 933 130 69 Long-term assets Inventories Trade receivables Cash & Cash equivalents Other assets Dec. 31 2005 Dec. 31 2006 (€m) Comments Financial debt as of December 31, 2006: • Outstanding bonds: €170 million • ABS: €156 million • Bilateral credit facilities: €147 million • Net financial debt reduced from €719 to €365million Equity: • Conversion shareholder loan: €165 million • IPO: capital increase €98 million • Strong results • Equity ratio increased from 14% to 31% Net Working Capital: • Increase in line with the additional sales Financials
21 365 M€ 558 M€ 50% 173% 0 200 400 600 FY 2005 FY 2006 €m/% Net debt Gearing Constant deleveraging • Strong cash flow leads to constant deleveraging and opens up room for acquisitions • Bond redeemed from €260 million to €170 million • Standard & Poor’s increased rating to “BB” with stable outlook Comments Financials Leverage* 2.8 0.9 Net debt FY 2005 excluding shareholder loans €161 million * Net indebtedness/EBITDA LTM Net debt and Gearing
22 Statement of Cash Flow FY 2005* FY 2006 (€m) * Pro-forma consolidated figures for the FY 2005 • Strong business development reflected in positive CF deriving from operational activities and increased NWC requirements • Investing CF FY 2006 mainly includes: - cash inflow from the sale of non core activity AVZ and real estate disposals - cash outflows mainly due to acquisitions of Targe, Aesga, Action Steel and Gauss Comments 38 -119 64 -33 -12 -62 15 98 - -136 -46 -6 -90 52 Proceeds from capital increase Net impact of change of financing Changes in financial liabilities Net interest payments Dividends Cash Flow from financing activities Total Cash Flow 22 -66 -44 102 -92 10 Inflow from disposals of fixed assets/others Outflow from investments in fixed assets Cash Flow from investing activities 179 126 -184 121 354 -195 -27 132 From operational activities Changes in net working capital Others Cash Flow from operating activities Financials
23 Challenging financial targets throughout the cycle Financials Target Actual 2006 Financial Targets Underlying sales growth Underlying EBITDA margin Leverage (Net financial debt/EBITDA) Gearing (Net financial debt/Equity) > 10% p.a > 6% < 3.0x < 150% 11% 7.1% 0.9x 50%
24 New holding facility increases scope for further acquisitions Debt structure ABS Europe ABS USA Total Syndicated Loan Bilateral Credit Agreements Total Senior Bank Facilities High Yield Bond Total Facilities Current Debt Structure Change in Debt Structure New Debt Structure 380 60 440 - 480 480 170 1,090 +40 - +40 +450 -100 +350 - +390 420 60 480 450 380 830 170 1,480 (€m)
25 Outlook / Guidance 2007 Basic Assumptions for 2007 • Positive prospects for the steel industry • Economic growth in relevant markets of about 1.8% -5% in 2007 • Stable and increasing demand especially in the construction and machinery industries • Price development stable or better – In H1 expected to rise Outlook Guidance • At least10% top line growth driven by acquisitions and organic growth • EBITDA at about 2006 level adjusted by one-offs – provided that the positive economic development continues • Dividend continuity: 30% payout ratio after deduction of extraordinary income
26 Financial Calendar 2007 and Contact Details Contact Details Investor Relations Claudia Nickolaus, Head of IR Phone: +49 (0) 203 307 2050 Fax: +49 (0) 203 307 5025 E-mail: claudia.nickolaus@kloeckner.de Internet: www.kloeckner.de Financial Calendar 2007 May 14: Q1 Interim Report June 20: General Shareholders’ Meeting August 15: Q2 Interim Report September 19: Analysts’ and Investors’ Meeting November 14: Q3 Interim Report Contact
27 Agenda 1. Overview, Market and Strategy Appendix 2. Financials and Outlook
28 Table of contents Appendix • Quarterly/FY Results 2006 • IPO on 28 June 2006 followed by free float increase
29 Quarterly/FY Results 2006 * Pro-forma consolidated figures for FY 2005, without release of negative goodwill of €139 million and without transaction costs of €39 million, without restructuring expenses of €17 million (incurred Q4) and without activity disposal of €1,9 million (incurred Q4). Appendix Q4 Q3 Q2 Q1 FY FY 2006 2006 2006 2006 2006 2005* Sales 1,398 1,394 1,418 1,323 5,532 4,964 Gross profit 294 313 316 285 1,208 986 % margin 21.0 22.5 22.3 21.5 21.8 19.9 EBITDA 70 143 104 79 395 197 % margin 4.9 10.3 7.3 6.0 7.1 4.0 EBIT 55 128 89 64 337 135 Financial result -12 -24 -14 -14 -64 -54 Income before taxes 43 104 75 50 273 81 Income taxes 16 -20 -21 -13 -39 -29 Minority interests 5 8 9 6 28 16 Net income 54 76 45 31 206 36 Earnings per Share in € 1.16 1.64 0.97 - 4.44 - (€m)
30 IPO on 28 June 2006 followed by free float increase IPO Highlights Issue price: €16 per share Offer Size: €264 million; of which Klöckner received €104 million gross proceeds from the capital increase Placement: 16.5 million shares (in total 46.5 million shares); thereof: • 6.5 million new shares from a capital increase • 10 million from the selling shareholder Lindsay Goldberg & Bessemer (via Multi Metal Investment S.à.r.l.) Current shareholder structure January 2007 sell-down • LGB/Management 15.5% • Free float 84.5% October 2006 sell-down • LGB/Management 45.0% • Free float 55.0% Post-IPO • LGB/Management 65.0% • Free float 35.0% • Mainly large European Institutional Investors • Increasing share of US Investors • Growing share of Retail Investors Appendix
31 Symbol
32 This presentation contains forward-looking statements. These statements use words like "believes, "assumes," "expects" or similar formulations. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of our company and those either expressed or implied by these statements. These factors include, among other things:  Downturns in the business cycle of the industries in which we compete;  Increases in the prices of our raw materials, especially if we are unable to pass these costs along to customers;  Fluctuation in international currency exchange rates as well as changes in the general economic climate and other factors identified in this presentation. In view of these uncertainties, we caution you not to place undue reliance on these forward-looking statements. We assume no liability whatsoever to update these forward-looking statements or to conform them to future events or developments. Disclaimer

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Klöckner & Co - Roadshow Presentation April 29, 2007

  • 1.
    Klöckner & Co -A Leading Multi Metal Distributor - April 2007 Gisbert Rühl CFO Dr. Thomas Ludwig CEO
  • 2.
    2 Agenda 1. Overview, Marketand Strategy Appendix 2. Financials and Outlook
  • 3.
    3 Klöckner & Coat a glance Klöckner & Co highlights • Leading producer-independent steel and metal distributor in the European and North American markets combined • Distribution network with approx. 240 warehouses in Europe and North America • About 10,000 employees • Key financials FY 2006 - Sales: €5,532 million - EBITDA: €395 million - Net indebtedness €365 million DistributorProducer Customer Products: Services: Construction: • Structural Steelwork • Building and civil engineering Machinery/ Mechanical Engineering Others: • Automotive • Metal products/ goods, installation • Durable goods • etc. Overview
  • 4.
    4 Distributor in thesweet spot Suppliers Sourcing Products and services Logistics/ Distribution Customers • Global Sourcing in competitive sizes • Strategic partnerships • Frame contracts • Leverage one supplier against the other • No speculative trading • One-stop-shop with wide product range of high-quality products • Value added processing services • Quality assurance • Efficient inventory management • Local presence • Tailor-made logistics including on- time delivery within 24 hours • More than 200,000 customers • No customer with more than 1% of sales • Average order size of €2,000 • Wide range of industries and markets • Service more important than price • Purchase volume p.a. of 6 million tones • Diversified set of worldwide ca. 70 suppliers • Examples: Klöckner & Co’s value chain Overview Global suppliers Local customers
  • 5.
    5 Global reach withbroad product and customer diversification Germany/ Austria 23% France/ Belgium 21% Switzerland 15% Spain 10% UK 9% Nether- lands 6% Eastern Europe 1% USA 10% Canada 5% Steel-flat Products 28% Steel-long Products 31%Tubes 9% Special Steel/ Quality Steel 10% Aluminum 8% Other Products 14% Construc- tion 40% Machinery/ Manufacturing 20% Auto- motive 5% Metal Products 20% Other 15% USA CAD USA CAN G 25 Locations F 76 Locations CH 31 Locations E 48 Locations UK 24 Locations IE 1 Location NL 7 Locations Eastern Europe 4 Locations CAN 5 Locations USA 17 Locations Total 238 Locations Locations (Dec. 31, 2006) Country headquarters Sales split by markets (2006) Sales split by product (2006) Sales split by industry (2006) IE Overview
  • 6.
    6 Strong position inEurope; significantly improved position in NA after acquisition of Primary Europe (2005) North America (2005) Arcelor Mittal AM3S 12% (Sales Distribution €3.2m = 5%) ThyssenKrupp 8% Corus 6.5% Klöckner & Co 5.9% Other Mill-Tied Distributors ~15- 25% Other Independents ~45-55% Klöckner & Co 6% Corus 4% Source: EuroMetal, Company reports, Klöckner & Co Other 72.5% Ryerson 5.0% Reliance Steel 4.4% Samuel, Son & Co. 2.3% ThyssenKrupp Materials NA 2.0% Russel Metals 1.9% Worthington Steel 1.6% Metals USA 1.3% Carpenter Technology 1.1% PNA Group 1.1% McJunkin 1.2% O'Neal Steel 1.4% MacSteel Service Centers 1.5% Olympic Steel 0.8% AM Castle 0.7% Klöckner & Co 1 1.0% 1) Operates as Namasco in North America Source: Purchasing Magazine (May 2006) Market Structure: 67% through distribution, service centers Size in value: ~€65–80bn Companies: ~3,000 few mill-tied, most independent Structure: 50-60% through distribution, service centers Size in value: ~€68-92bn Companies: ~1,300 only independent distributors Only independent in top tier
  • 7.
    7 Broad coverage ofthe US market and much stronger platform for further bolt-on acquisitions Geographical Scope Primary outlet Primary Sales office Oakland Houston Missouri Chicago Tampa Charlotte Arizona Arkansas Iowa Alabama Georgia South Carolina North Carolina Indiana Maryland Maine Connecticut Florida Louisiana Illinois Texas California Dubuque Louisville Indianapolis Atlanta B´ham Charleston Dallas Austin New Orleans Jacksonville Orlando Pompano Phoenix Santa Fee Springs Tulare West Memphis Savannah Portland Middletown New Castle Namasco Gen. line Namasco Processing • Sales: 2006: $467 million • Leading market position in plate distribution • Wide range of offered services • Broad geographic coverage with seven locations Key Facts Primary Steel
  • 8.
    8 Investment highlights • Theplate market is attractive and has a good perspective • Pricing has been relatively stable and less volatile than other segments (also supported by high supply side concentration) • Low dependency on individual market segments • Good growth perspective for main segments heavy equipment, oil & gas, transportation and railcar, shipbuilding, etc. • Primary is a well respected and well managed major player in plate distribution segment • Good quality based market reputation • Decent profitability and relatively good operational performance also supported by PE environment • Strong management team with good acquisition track record • A combined Primary and Namasco company would create a leading position in plate distribution • Estimated total market share of 10% in plate segment • Broad geographic coverage • Wide range of offered services • Complementary sales coverage combined with strong product overlap offers synergy potential • Namasco’s market coverage hugely enlarged • More than doubled purchasing power helps to counterweight the strong supplier consolidation (top 3 account for more than 90% of market) • Additional (typical) synergies in admin, finance, IT, etc. Growth in an attractive market segment Acquire respected and well managed business Synergies Leading position in plate segment Primary Steel
  • 9.
    9 High added value,low customer concentration with broad industry split and complementary product mix Product Mix (2006, $ mio.) (1) 0 50 100 150 200 250 Strip Mill As Rolled FR Pipe Merch. Bar Beams / struc. Tube others Primary Namasco Customer concentration Customer 1 Shipbuilding 4,2% Customer 2 Power Generation 3,1% Customer 3 Oil & Gas 1,9% Customer 4 Transp. Equipment 2,1% Customer 5 Service Center 1,9% Customer 6 Transp. Equipment 1,8% Customer 7 Oil & Gas 1,4% Customer 8 Oil & Gas 1,4% Customer 9 Ind. Equipment 1,3% Customer 10 Service Center 1,0% Segments Served Service Centres 33,5% Metal builders 2,9% Construction 2,6% Heavy in. Equip. 29,3% Transp. Equipment 4,5% Ship building 4,8% Oil & Gas 16,2% Power Generation 6,2% Sales split by type of value added Cut to length 45% Stock sales 34% Shearing 1% Slitting 3% Thermal cutting 13% Outside Processing 4% Primary Steel
  • 10.
    10 Steel industry trends Industrytrends supporting Klöckner’s strategy • Globalization and consolidation resulted in large costs savings, higher and more flexible capacity utilization, much better supply discipline and higher pricing power, which will prevent the margin destroying behaviour from the past • Capacity and export containment in China under the drive of central government • Higher material costs especially of iron ore and decreasingly relevant fixed costs have flattened the global steel cost curve in favour of developed-market steel producers • Stable global demand growth leads to far quicker destocking and eroded global overcapacity • On-going consolidation favouring large scale distributors • Higher prices with much shorter downturns support more stable earnings and cash flows for distributors Strategy
  • 11.
    11 Profitable growth Strategy Profitable growth throughvalue- added distribution and services within multi metals to companies in Europe and North America Grow more than the market Continuous business optimization 1 Acquisitions driving market consolidation 2 Organic growth and expansion into new markets 3 STAR Program: - Purchasing - Distribution network - Inventory management
  • 12.
    12 Acquisitions driving marketconsolidation1 Next steps Further acquisitions in core markets at attractive valuations: • Leverage existing structure with 10 to 12 smaller (local) bolt on acquisitions in 2007 • Medium and large scale acquisitions when appropriate • Include attractive industries, e.g. oil and gas Focus on targets in key markets at attractive valuations Strategy Benefits Significant synergy opportunities • Streamlining operations, processes and sales force • Integration of STAR Economies of scale • Stronger purchasing power Strategy Status Quo • Attractive valuations • Proven acquisition integration capability 04/2007: Teuling €14 million sales; 16 employees 01/2007: Tournier €35 million sales; 41 employees 10/2006: Action Steel €55 million sales; 110 employees 10/2006: Gauss €10 million sales; 40 employees 07/2006: Aesga €18 million sales; 40 employees 02/2006: Targe €25 million sales; 50 employees 10/2005: Alu Menziken Service €33 million sales; 70 employees 07/2005: Reynolds €108 million sales; 150 employees 04/2007: Primary Steel €360 million sales; 389 employees
  • 13.
    13 Organic growth andexpansion into new markets2 Status Quo • Strong growth in core markets above GDP partly as a result of the outstanding development of the construction and machinery industries and steel prices • Improved performance mainly in Germany and France due to organizational changes • Eastern European facilities established in Poland, Czech Republic, Romania and Baltic States • Extending activities of our Chinese representative office Next steps Expansion of strong market positions in core markets: • “STAR-Program” supporting organic growth • Selective extension of product range • Increase value added services through investments in new processing capacity • Extension of customer base • Opening of new branches in Eastern Europe (Romania, Poland, Czech Republic and Baltic States) Leveraging existing distribution network Strategy Benefits Sustainable profitable growth Strategy
  • 14.
    14 Purchasing – StatusQuo Improved performance as a result of restructured distribution network: • Close-down of warehouses in Northern Germany (3 0) • Reduction number of warehouses in the Lyon area in France (8 4) • Improvement warehouse structure in the Iowa- region in US (3 1) • Restructuring of service center business in Switzerland (3 1) 3 Next steps STAR: Status quo 2006 and next steps Distribution – Status Quo Next steps • Continuous improvement of distribution network throughout the Group with support of the optimization-tool “Prodacapo” (activity based costing) • Ongoing roll-out throughout the European countries • Finalize implementation of SAP throughout the European organization (France, Switzerland) and interface SAP with Prodacapo • Implement unified article code • Finalize central purchasing on country level, especially in Germany • Establish European purchasing (STAR Phase II) and increase sourcing from world-class suppliers with structural cost advantages • Frame contracts with main suppliers • Global sourcing for third party countries • Implementation of new organization in Germany (January 1, 2007) Strategy
  • 15.
    15 3 STAR: PhaseI finalized in 2008, further potential in Phase II Phase I (2005 - 2008) Overall targets: • Central purchasing on country level, especially in Germany • Improvement of distribution network • Improvement of inventory management 2006: ~ €20 million 2007: ~ €40 million 2008: ~ €20 million ~ €80 million Phase II (2008 onwards) Phase I upside potential Overall targets: • European Sourcing • Ongoing improvement of distribution network Strategy
  • 16.
    16 Agenda 1. Overview, Marketand Strategy Appendix 2. Financials and Outlook
  • 17.
    17 Strong quarterly developmentin 2006 compared to 2005 48494654 70 108104 74 05 Q1 06 05 Q2 06 05 Q3 06 05 Q4 06 EBITDA¹ (€m) Net debt deleveraging2 (€m) Sales (€m) 670 482 435 365 Q1 06 Q2 06 Q3 06 Q4 06 1,2171,191 1,348 1,207 1.3981,3941,4181,323 05 Q1 06 05 Q2 06 05 Q3 06 05 Q4 06 Fast and constants deleveraging Sales increase driven by volume and price increases 1) Adjusted by one-off effects (asset disposals): Q1 2006: about 5M€ and Q3 2006: about 35M€ 2) Q1 2006 incl. shareholder loan Strong profitability growth in Q2 and Q3 also driven by stock profits Financials
  • 18.
    18 Summary Income StatementQ4/FY 2006 --4.44--1.16Earnings per Share in € -36206-254Net income - - - 81 -29 16 273 -39 28 - - - 17 -11 4 43 16 5 Income before taxes Income taxes Minority interests +149.6% - 135 -54 337 -64 +77.4% - 31 -14 55 -12 EBIT Financial result +100.5% - 197 4.0 395 7.1 +42.9% - 49 4.0 70 4.9 EBITDA % margin +22.5% - 986 19.9 1,208 21.8 +11.4% - 264 21,7 294 21.0 Gross profit % margin +11.4%4,9645,532+14.8%1,2171,398Sales Ä% FY 2005* FY 2006Ä% Q4 2005 Q4 2006 (€m) * Pro-forma consolidated figures for FY 2005, without release of negative goodwill of €139 million and without transaction costs of €39 million, without restructuring expenses of €17 million (incurred Q4) and without activity disposal of €1,9 million (incurred Q4) Financials
  • 19.
    19 Segment Performance FY2006 3955,532Total -50-HQ/Consol. 79862North America 3664,670Europe EBITDASales(€m) • Both segments show excellent performance • Sales in Europe including €164 million from Reynolds (F), €65 million from Alu Menziken Metall Service (CH), €8 million from Aesga (E), €2 million from Gauss (CH), €20 million from Targe (F) and €8 million from Klöckner Romania • Sales in North America including €15 million from Action Steel Comments Financials
  • 20.
    20 Balance Sheet FY2006 957 719 1, 135 365 Net Working Capital Net financial debt 2,2562,552Total equity and liabilities 2,256 323 921 589 1,012 536 - 2,552 799 744 416 1,009 639 - Total assets Equity Total long-term liabilities - thereof financial liabilities Total short-term liabilities - thereof trade payables Other liabilities 595 694 800 80 87 579 841 933 130 69 Long-term assets Inventories Trade receivables Cash & Cash equivalents Other assets Dec. 31 2005 Dec. 31 2006 (€m) Comments Financial debt as of December 31, 2006: • Outstanding bonds: €170 million • ABS: €156 million • Bilateral credit facilities: €147 million • Net financial debt reduced from €719 to €365million Equity: • Conversion shareholder loan: €165 million • IPO: capital increase €98 million • Strong results • Equity ratio increased from 14% to 31% Net Working Capital: • Increase in line with the additional sales Financials
  • 21.
    21 365 M€ 558 M€ 50% 173% 0 200 400 600 FY2005 FY 2006 €m/% Net debt Gearing Constant deleveraging • Strong cash flow leads to constant deleveraging and opens up room for acquisitions • Bond redeemed from €260 million to €170 million • Standard & Poor’s increased rating to “BB” with stable outlook Comments Financials Leverage* 2.8 0.9 Net debt FY 2005 excluding shareholder loans €161 million * Net indebtedness/EBITDA LTM Net debt and Gearing
  • 22.
    22 Statement of CashFlow FY 2005* FY 2006 (€m) * Pro-forma consolidated figures for the FY 2005 • Strong business development reflected in positive CF deriving from operational activities and increased NWC requirements • Investing CF FY 2006 mainly includes: - cash inflow from the sale of non core activity AVZ and real estate disposals - cash outflows mainly due to acquisitions of Targe, Aesga, Action Steel and Gauss Comments 38 -119 64 -33 -12 -62 15 98 - -136 -46 -6 -90 52 Proceeds from capital increase Net impact of change of financing Changes in financial liabilities Net interest payments Dividends Cash Flow from financing activities Total Cash Flow 22 -66 -44 102 -92 10 Inflow from disposals of fixed assets/others Outflow from investments in fixed assets Cash Flow from investing activities 179 126 -184 121 354 -195 -27 132 From operational activities Changes in net working capital Others Cash Flow from operating activities Financials
  • 23.
    23 Challenging financial targetsthroughout the cycle Financials Target Actual 2006 Financial Targets Underlying sales growth Underlying EBITDA margin Leverage (Net financial debt/EBITDA) Gearing (Net financial debt/Equity) > 10% p.a > 6% < 3.0x < 150% 11% 7.1% 0.9x 50%
  • 24.
    24 New holding facilityincreases scope for further acquisitions Debt structure ABS Europe ABS USA Total Syndicated Loan Bilateral Credit Agreements Total Senior Bank Facilities High Yield Bond Total Facilities Current Debt Structure Change in Debt Structure New Debt Structure 380 60 440 - 480 480 170 1,090 +40 - +40 +450 -100 +350 - +390 420 60 480 450 380 830 170 1,480 (€m)
  • 25.
    25 Outlook / Guidance2007 Basic Assumptions for 2007 • Positive prospects for the steel industry • Economic growth in relevant markets of about 1.8% -5% in 2007 • Stable and increasing demand especially in the construction and machinery industries • Price development stable or better – In H1 expected to rise Outlook Guidance • At least10% top line growth driven by acquisitions and organic growth • EBITDA at about 2006 level adjusted by one-offs – provided that the positive economic development continues • Dividend continuity: 30% payout ratio after deduction of extraordinary income
  • 26.
    26 Financial Calendar 2007and Contact Details Contact Details Investor Relations Claudia Nickolaus, Head of IR Phone: +49 (0) 203 307 2050 Fax: +49 (0) 203 307 5025 E-mail: claudia.nickolaus@kloeckner.de Internet: www.kloeckner.de Financial Calendar 2007 May 14: Q1 Interim Report June 20: General Shareholders’ Meeting August 15: Q2 Interim Report September 19: Analysts’ and Investors’ Meeting November 14: Q3 Interim Report Contact
  • 27.
    27 Agenda 1. Overview, Marketand Strategy Appendix 2. Financials and Outlook
  • 28.
    28 Table of contents Appendix •Quarterly/FY Results 2006 • IPO on 28 June 2006 followed by free float increase
  • 29.
    29 Quarterly/FY Results 2006 *Pro-forma consolidated figures for FY 2005, without release of negative goodwill of €139 million and without transaction costs of €39 million, without restructuring expenses of €17 million (incurred Q4) and without activity disposal of €1,9 million (incurred Q4). Appendix Q4 Q3 Q2 Q1 FY FY 2006 2006 2006 2006 2006 2005* Sales 1,398 1,394 1,418 1,323 5,532 4,964 Gross profit 294 313 316 285 1,208 986 % margin 21.0 22.5 22.3 21.5 21.8 19.9 EBITDA 70 143 104 79 395 197 % margin 4.9 10.3 7.3 6.0 7.1 4.0 EBIT 55 128 89 64 337 135 Financial result -12 -24 -14 -14 -64 -54 Income before taxes 43 104 75 50 273 81 Income taxes 16 -20 -21 -13 -39 -29 Minority interests 5 8 9 6 28 16 Net income 54 76 45 31 206 36 Earnings per Share in € 1.16 1.64 0.97 - 4.44 - (€m)
  • 30.
    30 IPO on 28June 2006 followed by free float increase IPO Highlights Issue price: €16 per share Offer Size: €264 million; of which Klöckner received €104 million gross proceeds from the capital increase Placement: 16.5 million shares (in total 46.5 million shares); thereof: • 6.5 million new shares from a capital increase • 10 million from the selling shareholder Lindsay Goldberg & Bessemer (via Multi Metal Investment S.à.r.l.) Current shareholder structure January 2007 sell-down • LGB/Management 15.5% • Free float 84.5% October 2006 sell-down • LGB/Management 45.0% • Free float 55.0% Post-IPO • LGB/Management 65.0% • Free float 35.0% • Mainly large European Institutional Investors • Increasing share of US Investors • Growing share of Retail Investors Appendix
  • 31.
  • 32.
    32 This presentation containsforward-looking statements. These statements use words like "believes, "assumes," "expects" or similar formulations. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of our company and those either expressed or implied by these statements. These factors include, among other things:  Downturns in the business cycle of the industries in which we compete;  Increases in the prices of our raw materials, especially if we are unable to pass these costs along to customers;  Fluctuation in international currency exchange rates as well as changes in the general economic climate and other factors identified in this presentation. In view of these uncertainties, we caution you not to place undue reliance on these forward-looking statements. We assume no liability whatsoever to update these forward-looking statements or to conform them to future events or developments. Disclaimer